Under the direct method, as an adjustment to operating expenses per the statement of income, an increase in liabilities related to other operating expenses would be added to operating expenses to determine cash payments for operating expenses.

Question

Quizplus · Accepted Answer

Under the direct method, an increase in liabilities related to other operating expenses would actually be subtracted from operating expenses when determining cash payments for operating expenses, as the increase in liabilities indicates that these expenses have been incurred but not yet paid in cash.

Under the Direct Method, as an Adjustment to Operating Expenses